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charting retirement

Charting Retirement is a weekly snapshot of retirement-related data.

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File #: 5196878 Exclusive iStockphoto Photographer Tax Time in Canada Desk with lots of paper, Canadian federal tax form and a page from calendar with the last date to file tax return. Credit: Ireneusz Skorupa / iStockphoto (Royalty-Free)Ireneusz Skorupa/Getty Images/iStockphoto

Before 1975, real wages typically grew by more than 2 per cent a year. Wages have barely kept up with price inflation since then. While lower productivity is usually blamed, note the relationship between the unemployment rate and wage growth. When unemployment was high, wage growth was low and vice versa (just as one would expect based on the law of supply and demand). Three factors elevated the unemployment rate since 1975: the influx of baby boomers, women entering the work force and the offshoring of jobs to low-income countries. Since all three factors have now plateaued, expect Canadian wages to grow faster in real terms for many years to come. The implications for retirement are twofold: OAS will shrink as a percentage of the average wage and workers will need to save more.

(Source: OECD unemployment statistics, Canadian Institute of Actuaries economic statistics)

Frederick Vettese is former chief actuary of Morneau Shepell and author of Retirement Income for Life.

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